Onebeacon America Insurance v. Turner , 204 F. App'x 383 ( 2006 )

United States Court of Appeals
Fifth Circuit
F I L E D
In the October 30, 2006
United States Court of Appeals Charles R. Fulbruge III
for the Fifth Circuit Clerk
_______________
m 06-20302
Summary Calendar
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ONEBEACON AMERICA INSURANCE COMPANY;
INTERNATIONAL MARINE UNDERWRITERS,
Plaintiffs-Appellants,
VERSUS
THOMAS J. TURNER,
Defendant-Appellee.
_________________________
Appeal from the United States District Court
for the Southern District of Texas
m 4:05-CV-4343
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Before SMITH, WIENER, and OWEN, OneBeacon America Insurance Company
Circuit Judges. and International Marine Underwriters (collec-
tively “OneBeacon”) appeal a judgment that in
PER CURIAM:* part denied its effort to vacate an arbitration
award in favor of Thomas Turner. OneBeacon
challenges the finding that the arbitrators’
*
award of attorney’s fees in a maritime dispute
Pursuant to 5TH CIR. R. 47.5, the court has
was not in manifest disregard of maritime law;
determined that this opinion should not be pub-
it argues that the award should be vacated as
lished and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4. violative of public policy. Because OneBea-
con has not presented sufficient evidence to OneBeacon moved to vacate the award, ar-
demonstrate that the arbitrator was aware of a guing that the arbitrators had acted in manifest
clearly governing legal principle, and has disregard of the law in awarding attorney’s
identified no compelling public policy to justify fees and had exceeded their powers in award-
vacation, we affirm. ing administrative fees and expenses. OneBea-
con also challenged the factual findings
I. relating to personal effects and total loss of the
This dispute arises from an insurance yacht.
contract between the parties covering a yacht
that the parties agree had an insured value of The district court vacated the portion of the
$95,000. The vessel went missing and was award allocated to administrative fees and ex-
discovered with damage from flood and van- penses, finding that the arbitrators had acted
dalism. “in a manner inconsistent with the arbitration
provision.” OneBeacon Am. Ins. Co. v. Tur-
An initial insurance estimate determined ner, 2006 WL 547959, at *3 (S.D. Tex.
that the damage was between $55,000 and 2006). As to attorney’s fees, however, the
$65,000. OneBeacon, believing that Turner court denied the motion to vacate, noting there
was partially responsible, made an initial offer was “no evidence in this case that the arbitral
of $9,000. Turner rejected it and invoked the panel was aware of the Fifth Circuit law
insurance contract’s arbitration clause. That regarding attorney’s fees in cases governed by
clause provided that, if the parties could not maritime law and intentionally disregarded it.”
agree on a single arbitrator, each party could Id. at *2. The court also dismissed OneBea-
select an arbitrator, and those two would ap- con’s challenges to the factual findings. One-
point a third. The contract also stated that Beacon appeals solely on the issue of the
each party was responsible for its arbitrator’s attorney’s fees.
fees and half the third arbitrator’s fees and
costs. II.
OneBeacon presents two principal grounds
The parties chose to arbitrate in front of a for reversal. First, it argues that the award
three-member panel, subject to the rules of the was in manifest disregard of the law. Second,
American Arbitration Association. Both par- it contends the award should be vacated as
ties waived their right to record the proceed- contrary to public policy.
ings, and the arbitrators issued an award. The
panel found that the yacht was a “total loss,” A.
that Turner had complied with his required du- We recognized “manifest disregard for the
ties under the plan, and that OneBeacon had law” as a ground for vacating an arbitrator’s
breached the policy by failing to pay Turner decision in Williams v. Cigna Fin. Advisors
the full value of the yacht. The panel made a Corp., 197 F.3d 752, 759 (5th Cir. 1999)
monetary award to Turner for the yacht, for (stating that “parties [are] bound by [an] arbi-
personal property damage, for administrative trator’s decision not in ‘manifest disregard’ of
fees and expenses relating to the arbitration, the law”) (citing First Options, Inc. v. Kaplan,
and for attorney’s fees. 514 U.S. 938, 942 (1995)). Later cases have
clarified this standard, noting that “it clearly
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means more than error or misunderstanding show that the arbitrator was aware of the gov-
with respect to the law.” Prestige Ford v. erning principle and did not follow it. Having
Ford Dealer Computer Servs., Inc., 324 F.3d failed to secure a record of the arbitration pro-
391, 395 (5th Cir. 2003). ceedings, and without any evidence that the ar-
bitral panel was aware of the Fifth Circuit
There are two steps in the “manifest disre- standard, OneBeacon cannot make this show-
gard” analysis. First, “the error must have ing, so its claim that the award was in “mani-
been obvious and capable of being readily and fest disregard” of the law fails at the first step
instantly perceived by the average person qual- of the Kergosien analysis.
ified to serve as an arbitrator.” Kergosien v.
Ocean Energy, Inc., 390 F.3d 346, 355 (5th B.
Cir. 2004). Furthermore, “the term ‘disregard’ OneBeacon maintains that the award should
implies that the arbitrator appreciates the ex- be vacated as contrary to public policy. A
istence of a clearly governing principle but de- court may refuse to enforce an award that is
cides to ignore or pay no attention to it.” Id. contrary to “explicit, well-defined, and domi-
The governing law must be “well-defined, ex- nant” public policy. Prestige Ford, 324 F.2d
plicit, and clearly applicable.” Prestige Ford, at 396 (5th Cir. 2003) (citations omitted).
324 F.3d at 395. For the second step, “before
an arbitrator’s award can be vacated, the court OneBeacon’s asserted public policy, how-
must find that the award resulted in a signifi- everSSthe need for uniformity of maritime
cant injustice.” Kergosien, 390 F.3d at 355. lawSS is nothing more than a restatement of its
earlier claim that the award should be vacated
OneBeacon argues, correctly, that this because the arbitrator misapplied the law.
court has held that “[m]aritime disputes “Typically, the public policy exception is im-
generally are governed by the American Rule, plicated when enforcement of the award
pursuant to which each party bears its own compels one of the parties to take action
costs.” Tex. A&M Research Found. v. Magna which directly conflicts with public policy.”
Transp., Inc., 338 F.3d 394, 405 (5th Cir. Brown v. Rauscher Pierce Refsnes, Inc., 994
2003). This general rule, “coupled with the F.2d 775, 782 (11th Cir. 1993). Where a
need for uniformity in federal maritime law,” public policy argument amounts to “no more
precludes the application even of mandatory than a complaint that the Panel failed to inter-
state attorney’s fee statutes. Id. at 406. Ab- pret the law correctly,” courts will not set
sent a federal statute or an enforceable aside the award. Id.contract, “litigants must pay their own
attorney’s fees.” Id. at 405-06. There is no error. The judgment is
AFFIRMED.
As a matter of law, then, Turner is not en-
titled to attorney’s fees. The failure of an ar-
bitrator to apply the law correctly “is not a ba-
sis for setting aside an arbitrator's award.”
Kergosien, 390 F.3d at 356. For us to find the
“manifest disregard” of the law required for
vacatur of an arbitral award, OneBeacon must
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